BRISTOL, Tenn., Aug. 5 /PRNewswire-FirstCall/ -- King Pharmaceuticals,
Inc. (NYSE: KG) announced today that total revenues decreased 25% to
$275.1 million during the second quarter ending June 30, 2004 compared to
$367.0 million during the second quarter of 2003. During the second quarter
ending June 30, 2004, including special items, King incurred a net loss of
$63.5 million, or a loss of $0.26 per diluted share, compared to a net loss of
$35.0 million and a diluted loss per share of $0.15 in the same period of the
prior year. Excluding special items, net earnings decreased 86% to
$11.5 million and diluted earnings per share decreased 85% to $0.05 during the
second quarter ending June 30, 2004 from net earnings of $82.6 million and
diluted earnings per share of $0.34 during the second quarter of 2003.
For the six months ending June 30, 2004, total revenues decreased 20% to
$565.8 million compared to $705.4 million during the first six months of 2003.
During the six months ending June 30, 2004, including special items, King
incurred a net loss of $174.6 million, or a loss of $0.72 per diluted share,
in comparison to a net loss of $42.2 million and a loss of $0.18 per diluted
share in the same period of the prior year. Excluding special items, net
earnings decreased 77% to $37.4 million and diluted earnings per share
decreased 78% to $0.15 during the six months ending June 30, 2004 from net
earnings of $164.8 million and diluted earnings per share of $0.68 during the
first six months of 2003.
Brian A. Markison, President and Chief Executive Officer of King,
commented, "As we previously disclosed, we anticipated that our revenues would
be significantly affected during the second quarter of 2004 as we effectively
reduced wholesale inventory levels. Accordingly, I am pleased to announce
that, as of June 30, 2004, wholesale inventory levels of our four key branded
pharmaceutical products, based on data obtained through our inventory
management agreements with our three largest customers and IMS America
prescription data, were on average at an acceptable level of approximately
2.4 months of prescription demand. As a result, we anticipate that future
quarterly net sales of our key branded products should more closely reflect
demand-based sales."
King recorded special items resulting in a net charge totaling
$79.5 million, or $75.0 million net of tax, during the second quarter ending
June 30, 2004. More specifically, special items during the second quarter of
2004 include i) a $65.0 million charge representing the Company's current best
estimate of the interest, costs, fines, penalties and all other amounts in
excess of the $65.4 million King previously accrued for purposes of resolving
the ongoing investigations of the Company by the U.S. Securities and Exchange
Commission ("SEC") and the Office of the Inspector General ("OIG") of the
Department of Health and Human Services, as more fully discussed below, plus a
charge of $5.0 million related primarily to professional fees associated with
these matters; ii) a charge of $6.2 million primarily due to the relocation of
the Company's sales and marketing operations from Bristol, Tennessee to
Princeton, New Jersey and separation agreements with several executives; iii)
a charge of $4.6 million primarily related to the recall of certain lots of
Levoxyl(R) (levothyroxine sodium tablets, USP); iv) a charge of $3.1 million
for professional fees and expenses primarily associated with the Company's
previously announced plan to merge with Mylan Laboratories Inc.; v) a charge
of $2.4 million due to an increase in the valuation allowance for Novavax,
Inc. convertible notes which Novavax since repurchased from the Company; vi) a
gain of $3.4 million on the sale of the Anusol-HC(R) and Proctocort(R) product
lines; and vii) a gain of $3.3 million from discontinued operations. King
recorded special items totaling $180.8 million, or $117.6 million net of tax,
during the second quarter ending June 30, 2003, primarily due to a charge for
in-process research and development associated with King's acquisition of new
formulations of Sonata(R) (zaleplon). During the first quarter of 2004, King
recorded special items resulting in a net charge totaling $215.2 million, or
$137.0 million net of tax, primarily due to a loss from discontinued
operations that resulted from the Company's decision to divest many of its
women's health products. During the three months ending March 31, 2003, King
recorded special items totaling $129.6 million, or $89.4 million net of tax,
primarily due to an intangible asset impairment charge for Florinef(R)
(fludrocortisone acetate, USP).
Net revenue from branded pharmaceuticals, including royalty income,
totaled $240.7 million during the second quarter of 2004, a 26% decrease from
the second quarter of 2003. Meridian Medical Technologies, our wholly owned
subsidiary, contributed $27.7 million of net revenue in the second quarter of
2004 compared to $34.3 million during the same period of the prior year.
Revenue from contract manufacturing during the second quarter of 2004 equaled
$6.8 million.
Altace(R) (ramipril) net sales equaled $68.4 million in the second quarter
of 2004, a 51% decrease from $140.1 million during the second quarter of 2003.
Total prescriptions for Altace(R) equaled 3,237,844 during the second quarter
of 2004, an increase of 9.3% over the same period of the prior year, according
to IMS America monthly prescription data.
Levoxyl(R) net sales equaled $25.3 million during the second quarter
ending June 30, 2004 compared to $25.9 million during the second quarter of
2003. As previously disclosed, the U.S. Food and Drug Administration ("FDA")
approved supplemental New Drug Applications ("sNDA") during the second quarter
of 2004 which provide that Unithroid(R) (levothyroxine sodium tablets, USP)
and Levo-T(R) (levothyroxine sodium tablets, USP) are bioequivalent and
therapeutically equivalent to Levoxyl(R). Similarly, the FDA has since
approved a supplemental Abbreviated New Drug Application ("sANDA") which
provides that Mylan's previously approved generic for Unithroid(R) is
bioequivalent and therapeutically equivalent to Levoxyl(R).
Net sales of Skelaxin(R) (metaxalone) totaled $55.2 million and Sonata(R)
totaled $7.9 million during the second quarter of 2004.
Net sales of Thrombin-JMI(R) (thrombin, topical, bovine, USP) totaled
$31.3 million during the second quarter ending June 30, 2004, a decrease of
11% from $35.0 million during second quarter of 2003.
Royalty revenues, derived primarily from Adenoscan(R) (adenosine), totaled
$21.1 million in the second quarter of 2004, a 30% increase from $16.2 million
during the same period of the prior year.
As part of the Company's ongoing discussions with governmental agencies
pertaining to the previously announced ongoing investigations of the Company
by the SEC and the OIG, the Company has begun to discuss the possibility of
settling these matters. Although the Company has not reached any agreements or
understandings with respect to a possible settlement, the Company believes
that, solely for accounting purposes, it is probable that it will enter into a
settlement with respect to such investigations. As a result, in accordance
with Generally Accepted Accounting Principles King has accrued $65.0 million
as an estimate of the interest, costs, fines, penalties and all other amounts
in excess of the $65.4 million it previously accrued for the Company's
estimated underpayments to Medicaid and other governmental pricing programs.
These accruals represent King's current best estimate of the aggregate payment
it would have to make pursuant to a comprehensive settlement with respect to
such matters. There can be no assurance that King will be able to reach a
settlement, whether on these terms or at all, and the amount King actually has
to pay to resolve these matters could be more or less than the total amount
the Company has accrued.
As previously reported, during the third quarter of 2004 Mylan and King
entered into a definitive agreement under which Mylan will acquire King in a
stock-for-stock transaction, creating a leading diversified specialty
pharmaceutical company. The transaction is expected to close before the end
of 2004, subject to regulatory approvals, customary closing conditions and
shareholder approvals.
King also announced that it plans to discontinue its development of a
modified-release formulation of Altace(R).
Conference Call Information:
King will provide a live webcast of its conference call scheduled for
today, Thursday, August 5, 2004, at 8:00 a.m., E.D.T. to address the Company's
financial results for the second quarter of 2004, and other matters raised in
this press release. Interested persons may listen to the conference call at
http://phx.corporate-ir.net/playerlink.zhtml?c=93939&s=wm&e=918761 or by
dialing 800-862-9098 (US only) or 785-424-1051 (international), passcode KG.
If you are unable to participate during the live webcast, the call will be
archived on King's web site, http://www.kingpharm.com , for not less than
15 days following the call. A replay of the conference call will also be
available for not less than 15 days following the call by dialing 888-274-8337
(US only) or 402-220-2329 (international).
About King:
King, headquartered in Bristol, Tennessee, is a vertically integrated
branded pharmaceutical company. King, an S&P 500 Index company, seeks to
capitalize on opportunities in the pharmaceutical industry through the
development, including through in-licensing arrangements and acquisitions, of
novel branded prescription pharmaceutical products in attractive markets and
the strategic acquisition of branded products that can benefit from focused
promotion and marketing and product life-cycle management.
About GAAP:
Under Generally Accepted Accounting Principles ("GAAP"), "net earnings"
and "diluted earnings per share" include special items. In addition to the
results determined in accordance with GAAP, King provides its net earnings and
diluted earnings per share results for the second quarter and six months
ending June 30, 2004 excluding special items. These non-GAAP financial
measures exclude special items which King considers to be those items that do
not relate to the Company's ongoing, underlying business, are non-recurring,
or are not generally predictable. These items include, but are not limited
to, merger and restructuring expenses; non-capitalized expenses associated
with acquisitions, such as in-process research and development charges and
one-time inventory valuation adjustment charges; charges resulting from the
early extinguishment of debt; asset impairment charges; expenses of drug
recalls; and gains and losses resulting from the divestiture of assets. King
believes the identification of special items enhances an analysis of the
Company's ongoing, underlying business and an analysis of the Company's
financial results when comparing those results to that of a previous or
subsequent like period. However, it should be noted that the determination of
whether to classify an item as a special item involves judgments by King's
management. A reconciliation of non-GAAP financial measures referenced herein
and King's financial results determined in accordance with GAAP is provided
below.
Forward-looking Statements:
This release contains forward-looking statements which reflect
management's current views of future events and operations, including, but not
limited to, statements pertaining to future net sales of King's branded
pharmaceutical products; statements pertaining to the SEC and OIG
investigations of the Company; and statements pertaining to Mylan's
anticipated acquisition of King. These forward-looking statements involve
certain significant risks and uncertainties, and actual results may differ
materially from the forward-looking statements. Some important factors which
may cause results to differ include: dependence on future net sales of King's
key branded pharmaceutical products, particularly AltaceR, SkelaxinR, and
Sonata(R); dependence on the availability and cost of raw materials;
dependence of the accuracy of King's estimate of wholesale inventory levels of
its products; dependence on no material interruptions in supply by contract
manufacturers of King's products; dependence of the affect of generic
substitution for Levoxyl(R); dependence on the potential effect on sales of
our existing branded pharmaceutical products as a result of the potential
development and approval of a generic substitute for any such product or other
new competitive products; dependence on whether our customers order
pharmaceutical products in excess of normal quantities during any quarter
which could cause our sales of branded pharmaceutical products to be lower in
a subsequent quarter than they would otherwise have been; dependence on the
actual outcome of the SEC and OIG investigations; dependence on the occurrence
of all contingencies necessary to complete the closing of Mylan's acquisition
of King; dependence on our compliance with FDA and other government
regulations that relate to our business; and dependence on changes in general
economic and business conditions; changes in current pricing levels; changes
in federal and state laws and regulations; and manufacturing capacity
constraints. Other important factors that may cause actual results to differ
materially from the forward-looking statements are discussed in the "Risk
Factors" section and other sections of King's Form 10-K for the year ended
December 31, 2003 and Form 10-Q for the first quarter ended March 31, 2004
which are on file with the Securities and Exchange Commission. King does not
undertake to publicly update or revise any of its forward-looking statements
even if experience or future changes show that the indicated results or events
will not be realized.
KING PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
2004 2003 2004 2003
(Unaudited) (Unaudited)
REVENUES:
Total revenues $275,140 $367,015 $565,784 $705,436
OPERATING COSTS AND EXPENSES:
Cost of revenues 80,825 90,108 164,363 165,288
Excess purchase commitment -- -- 4,176 --
Write-off of acquisition
related inventory step-
up/recall 4,586 1,536 4,586 5,797
Total cost of revenues 85,411 91,644 173,125 171,085
Selling, general and
administrative 99,132 58,653 180,042 102,768
Special legal and
professional fees 4,993 14,296 10,685 14,296
Co-promotion fees 20,823 55,241 48,327 116,941
Total selling, general,
and administrative 124,948 128,190 239,054 234,005
Depreciation and
amortization 38,466 20,637 77,784 38,274
Research and development 17,478 11,093 33,501 20,729
Research and development
- In-process upon
acquisition -- 175,000 -- 193,000
Medicaid related charge 65,000 -- 65,000 --
Transaction costs 3,126 -- 3,126 --
Intangible asset impairment -- -- 34,936 110,970
Restructuring charges 6,153 -- 6,153 --
Gain on sale of product
lines (3,421) -- (4,279) --
Total operating costs
and expenses 337,161 426,564 628,400 768,063
OPERATING LOSS (62,021) (59,549) (62,616) (62,627)
OTHER (EXPENSES) INCOME:
Interest expense (3,266) (3,435) (6,371) (6,469)
Interest income 1,081 2,199 2,135 4,693
Valuation (charge) benefit
- convertible notes
receivable (2,438) 7,647 (2,487) 15,614
Other expenses 1,168 (15) 465 (98)
Total other (expenses)
income (3,455) 6,396 (6,258) 13,740
LOSS FROM CONTINUING
OPERATIONS BEFORE INCOME
TAXES (65,476) (53,153) (68,874) (48,887)
Income tax expense
(benefit) 152 (16,653) (896) (7,977)
LOSS FROM CONTINUING
OPERATIONS (65,628) (36,500) (67,978) (40,910)
DISCONTINUED OPERATIONS
Gain (loss) from
discontinued operations,
including expected loss on
disposal 3,332 2,338 (167,910) (2,044)
Income tax expense
(benefit) 1,243 853 (61,289) (746)
Total gain (loss) from
discontinued
operations 2,089 1,485 (106,621) (1,298)
NET LOSS $(63,539) $(35,015) $(174,599) $(42,208)
Basic loss per common share $(0.26) $(0.15) $(0.72) $(0.18)
Diluted loss per common share $(0.26) $(0.15) $(0.72) $(0.18)
Shares used in basic net loss
per share 241,383 240,954 241,341 240,866
Shares used in diluted net
loss per share 241,383 240,954 241,341 240,866
KING PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
EXCLUDING SPECIAL ITEMS
(in thousands, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
2004 2003 2004 2003
(Unaudited) (Unaudited)
REVENUES:
Total revenues $275,140 $367,015 $565,784 $705,436
OPERATING COSTS AND EXPENSES:
Cost of revenues 80,825 90,108 164,363 165,288
Selling, general and
administrative 99,132 58,653 180,042 102,768
Co-promotion fees 20,823 55,241 48,327 116,941
Total selling, general,
and administrative 119,955 113,894 228,369 219,709
Depreciation and
amortization 38,466 20,637 77,784 38,274
Research and development 17,478 11,093 33,501 20,729
Total operating costs
and expenses 256,724 235,732 504,017 444,000
OPERATING INCOME 18,416 131,283 61,767 261,436
OTHER (EXPENSES) INCOME:
Interest expense (3,266) (3,435) (6,371) (6,469)
Interest income 1,081 2,199 2,135 4,693
Other expenses 1,168 (15) 465 (98)
Total other expenses (1,017) (1,251) (3,771) (1,874)
INCOME BEFORE INCOME TAXES 17,399 130,032 57,996 259,562
Income tax expense 5,932 47,462 20,589 94,740
NET INCOME $11,467 $82,570 $37,407 $164,822
Basic income per common share $0.05 $0.34 $0.15 $0.68
Diluted income per common
share $0.05 $0.34 $0.15 $0.68
Shares used in basic net
income per share 241,383 240,954 241,341 240,866
Shares used in diluted net
income per share 241,745 241,452 241,754 241,457
KING PHARMACEUTICALS, INC.
RECONCILIATION OF NON-GAAP MEASURES
(in thousands, except per share data)
The following tables reconcile Non-GAAP measures to amounts reported under
GAAP:
Three Months Ending Six Months Ending
June 30, 2004 June 30, 2004
EPS EPS
Net income, excluding
special charges $11,467 $37,407
Diluted income per
common share,
excluding special items $0.05 $0.15
SPECIAL ITEMS:
Excess purchase
commitment (cost
of goods sold) -- -- (4,176) (0.02)
Write-off of acquisition
related inventory
step-up/recall
(cost of goods sold) (4,586) (0.02) (4,586) (0.02)
Special legal and
professional fees
(selling, general,
and administrative) (4,993) (0.02) (10,685) (0.04)
Medicaid related charge
(other operating costs
and expenses) (65,000) (0.27) (65,000) (0.27)
Transaction costs (other
operating costs and
expenses) (3,126) (0.01) (3,126) (0.01)
Intangible asset impairment
(other operating
costs and expenses) -- -- (34,936) (0.14)
Restructuring charges
(other operating costs
and expenses) (6,153) (0.03) (6,153) (0.03)
Gain on sale of product
lines (other operating
costs and expenses) 3,421 0.02 4,279 0.02
Valuation charge - convertible
notes receivable
(other expenses) (2,438) (0.01) (2,487) (0.01)
Gain (loss) from
discontinued operations 3,332 0.01 (167,910) (0.69)
Income tax benefit 4,537 0.02 82,774 0.34
Net loss $(63,539) $(174,599)
Diluted loss per common
share, as reported
under GAAP $(0.26) $(0.72)
Three Months Ending Six Months Ending
June 30, 2003 June 30, 2003
EPS EPS
Net income, excluding
special charges $82,570 $164,822
Diluted income per common
share, excluding
special items $0.34 $0.68
SPECIAL ITEMS:
Write-off of acquisition
related inventory
step-up/recall
(cost of goods sold) (1,536) (0.01) (5,797) (0.02)
Special legal and
professional fees
(selling, general,
and administrative) (14,296) (0.06) (14,296) (0.06)
In-process research and
development (other
operating costs and
expenses) (175,000) (0.72) (193,000) (0.80)
Intangible asset
impairment (other
operating costs
and expenses) -- -- (110,970) (0.46)
Valuation benefit
- convertible notes
receivable (other income) 7,647 0.03 15,614 0.06
Gain (loss) from
discontinued operations 2,338 0.01 (2,044) (0.01)
Income tax benefit 63,262 0.26 103,463 0.43
Net loss $(35,015) $(42,208)
Diluted loss per
common share, as
reported under GAAP $(0.15) $(0.18)
KING PHARMACEUTICALS, INC.
CONSOLIDATED BALANCE SHEET
(in thousands, except share data)
June 30, December 31,
ASSETS 2004 2003
Current assets:
Cash, cash equivalents and
marketable securities $106,807 $146,053
Restricted cash 129,738 133,969
Accounts receivable, net 255,697 246,417
Inventory 236,855 260,886
Deferred income taxes 179,283 124,930
Prepaid expenses and other assets 64,534 30,036
Assets related to discontinued
operations 1,031 4,012
Total current assets 973,945 946,303
Property, plant and equipment, net 273,468 257,659
Intangible assets, net 1,447,109 1,552,492
Goodwill 134,892 121,355
Deferred income tax assets 57,585 19,307
Other assets 45,926 76,117
Assets related to discontinued
operations 30,469 204,501
Total assets $2,963,394 $3,177,734
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long term debt $-- $97
Accounts payable 61,125 83,078
Accrued expenses 580,155 506,033
Income taxes payable 26,182 79,641
Total current liabilities 667,462 668,849
Long-term debt:
Convertible Debentures 345,000 345,000
Other long-term liabilities 81,032 121,705
Total liabilities 1,093,494 1,135,554
Shareholders' equity:
Common shares no par value,
300,000,000 shares authorized,
241,412,511 and 241,190,852
shares issued and outstanding,
respectively 1,208,294 1,205,970
Retained earnings 660,498 835,097
Other comprehensive income 1,108 1,113
Total shareholders' equity 1,869,900 2,042,180
Total liabilities and
shareholders' equity $2,963,394 $3,177,734
SOURCE King Pharmaceuticals, Inc.
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Related links:
http://www.kingpharm.com
Company News On-Call:
http://www.prnewswire.com/comp/120319.html
CONTACT:
James E. Green, Executive Vice President,
Corporate Affairs of King Pharmaceuticals, Inc., +1-423-989-8125
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